A 10-year-old boy who has lived in the UK for three years with his family has been told by a high court judge he must return to Iran as soon as possible, despite a petition to prevent his deportation that has more than 5,000 signatures.

The boy, who is known as Child M, sought a judicial review against his imminent deportation to his birth country with his mother, Farah Ghaemi, 45. During a hearing at Manchester's civil justice centre today, a psychiatrist's report spoke of the boy's frequent nightmares, problems sleeping and his hair falling out.

The child has attended weekly counselling sessions since January 2010, partially as a result of the trauma when he was detained at Yarl's Wood immigration removal centre, in Bedfordshire, on two occasions. Last week, lawyers secured a last-minute injunction preventing the family's removal the following day, on 14 September.

A full hearing took place today, after which Judge Pelling ruled there was no basis for him to stay in this country. He said there had been evidence the family had forged documents and lied to prolong their stay in the UK and they should return to Iran as soon as possible.

"This is an abusive claim in the legal sense," he said. "It is a re-run of arrangements made and dismissed and it is without merit." The boy fidgeted nervously during the lengthy proceedings beside a group of 20 supporters who were in court.

The family say Farah Ghaemi and her 23-year-old daughter face arrest if they return to Iran for distributing and copying Salman Rushdie's book, The Satanic Verses. But Sarabjit Singh, for the government, says the allegation about the book was "fabricated". It was also claimed that the boy's older brother, Ahmed, had falsely claimed he was homosexual and faced persecution if he had to return to Iran in order to extend his stay in the UK.

But supporters said the campaign would continue despite the ruling. tonight they were holding a vigil outside Manchester town hall and they will continue to call upon the immigration minister, Damien Green, to reconsider.

Katy Rosario, of the Child M campaign, said: "We are definitely going to carry on the campaign. Our argument has always been that this family has been treated so unfairly by the asylum system. It is now dangerous for them to return to Iran. It is horrible to hear the things that have been said in court when their lives are in danger. They have appeared in the media and his mother has been in the press without a headscarf."

The family's consituency MP, Sir Gerald Kaufman, said last week if the boy's mother returned to Iran "this woman will undoubtedly be exposed to the possibility of being flogged, tortured, imprisoned or stoned. This is an extremely cruel and dangerous regime. To send a family that includes a vulnerable woman to a place with Iran's current and past record strikes me as intolerable."

Pelling said that an immigration judge had previously found there was no evidence the boy's mother and elder daughter had copied The Satanic Verses. In November, the boy was held in an early morning deportation raid, and his family say he was terrified during his incarceration. The family were taken to Yarl's Wood on 17 November, and told they would be deported the following day, but their lawyers filed fresh evidence relating to their case and they were released three weeks later. His first detention, in July 2008, had lasted 56 days.